I’ve been busy lately, working, helping out at mises.ca, reading, but here is a peice that I have put together over the last two weeks or so. It should be up at mises.ca this week.

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With the Occupy Movements developed in several major American and Canadian cities, the issue of wealth inequality has again come to the attention of many people. The Occupy Movement claims to be the voice of the so called “99%” in contrast to the remaining “1%” that controls most of the planet’s wealth. This seems to be a crude way of rephrasing Marx’s attack on the bourgeois’ exploitation of the proletariat. We all remember that day in school when little Suzy was asked what her least favourite class was. “The bourgeoisie,” she replied” because they own the means of production.”

Fundamentally libertarians should stay neutral on the issue of wealth inequality. First, because it has no relation to the non-aggression axiom. Rather it is subject to the personal tastes of the individual. For any number of reasons, cultural, religious, personal, etc. vast inequalities of wealth may appeal to some and not to others. Second making value judgements about wealth inequality seems to be something that requires study of history. If we have a given wealth inequality at one stage in time and a different one some time later, we cannot deduce a-priori as libertarians that this second wealth inequality is just or unjust. Libertarians must instead study a given period of time and deduce from empirical analysis whether violent means, that is, the political means, were used to bring about the current distribution of wealth. If violence was widespread in bringing into existence a given distribution of property, we can probably deduce that the result is unjust.i

Peter Sloterdijk recently wrote: In an earlier day, the rich lived at the expense of the poor, directly and unequivocally; in a modern economy, unproductive citizens increasingly live at the expense of productive ones—though in an equivocal way, since they are told, and believe, that they are disadvantaged and deserve more still. Today, in fact, a good half of the population of every modern nation is made up of people with little or no income, who are exempt from taxes and live, to a large extent, off the other half of the population, which pays taxes.

I find this passage a bit confusing. Maybe this is because of the use of the words “rich” and “poor” next to “productive” and “unproductive”. If what is meant is that in the past the unproductive lived off the productive, then yes, this is true but tautological: the unproductive by definition live off the productive. Yet to this day we have a parasitic class living off the labour of a productive one. The debate seems to be whether in our present day the rich have shifted from being the exploiters to the exploited.

I maintain that the exploiting class is almost always wealthy (though not all those who are wealthy are part of the exploiting class.) It seems safe to assume that a parasitic political class that gets its wealth from violent expropriation would over time accumulate this wealth; not only over one generation but several. Look at the Kennedys, the Bushes, the Morgans, and the Rockefellers as examples. Likewise, the exploited classes, as they are driven further down into the dirt, see their situation continue to worsen until they are stuck in a recurring cycle of poverty. As a given society moves further from a genuine free market libertarian order, it becomes truer to say that the rich are exploiting the poor. It does not begin so but that is the inevitable result. Exploiters confiscate greater wealth, while the exploited become continually impoverished. Wealth inequality is the result.

Sloterdijk mentions incomes taxes in his article and we are often reminded of statistics showing that the wealthiest pay the most taxes.ii I think this is a misleading way of analyzing wealth inequality. It is clear that members of parliament, congressmen, senators, heads of government departments may be wealthy individuals and for that reason pay high taxes. But few libertarians would feel sympathy for them: you cannot steal from a thief. This analysis should be applied just as strictly to the so called “private sector”. Corporations such as General Electric and Lockheed Martin may pay very high rates of corporate taxes indeed, and their CEOs may shovel over large portions of their salaries to the state.

Clearly, though, it is not obvious that these companies are worse off as a result of government policy. Entire forms of industry benefit from government privileges in the form of central banking, patents, tariffs, subsidies, etc. To say that they are disadvantaged because of progressive taxation, while ignoring the benefits they receive seems to be a rather one sided way of looking at things.

Some libertarians and conservatives will often attempt to point to the redistributive “social justice” aspect of the modern welfare state as somehow particular to this day and age. Sloterdijk at least implies this in his subtitle, “The modern democratic state pillages its citizens.” I beg your pardon, but what were states doing before then? Yes, there is a vast welfare apparatus that, in theory, serves the poor and acts as a social safety net. The institution of public debt has also been tweaked and fine tuned, allowing for a monstrous growth in government growth, and debt, at all levels. But the basic exploiter-exploited dynamic remains the same.

I hold the view that the welfare state is generally a secondary market intervention brought about to soften the harsh effects of previous state interventions in the economy. These include cartelization of the banking sector and the resulting permanent inflation, land monopolization by the state, creeping regulation and the creation of high legal barriers of entry to virtually every industry, tariffs, the existence of a permanent war economy, and more recently, the creation of innovation crushing intellectual property “rights”. Such an economic system is inherently unstable, among other reasons because the productive classes can only be squeezed for so long.

An inevitable result of such economic interventions is unemployment, business cycles, inflation, social decay, and general impoverishment. To counter these tendencies more “liberal” interventions are created by policy makers in the form of state pensions and unemployment insurance, minimum wage legislation, work place safety standards, public works, progressive taxation, state education and healthcare services, etc. to help bring some sort of temporary social and economic stability to the system. These interventions are themselves temporary and don’t help to alleviate the fundamental instabilities within the economic system. As time passes these market interventions in turn only further distort rational economic calculation, producing more economic and social turmoil. The process is a vicious cycle.iii

Furthermore we should keep in mind that corporate elites have themselves supported various aspects of the welfare state and corporate regulation throughout the mid-to-late 19th and 20th centuries.iv I think this is a very important point to emphasize when debating both the left and right. Many pundits who condemn the welfare state either ignore, or are oblivious to, the fact that its establishment is to a good extent a result of cooperation between wealthy elites and the state. It is true that a large percent of the population is dependent on government handouts. However we should not blame welfare recipients for the existence of the welfare state. Likewise it is incorrect to claim that welfare recipients are the same ones responsible for bringing these policies into existence, have any say in how they are crafted, or have any power over their execution. I may use Canada Post, drive down a city street, or send my child to public school. I may even be, for a temporary period, worse off if these options were taken away from me. But does this render me a member of the exploitative political class? I think not.

Marx, to paraphrase him again, said that religion was the opiate of the masses. It seems that role is now served by the welfare state. It keeps the exploited class in a subservient role, insuring that they do not question the intentions of their masters, while at the same time making them think they are looked after. If the political situation starts getting fiery, and the elite get nervous, policies are changed, tweaked, or reworked. This process can be slow and incremental, such as an increase in minimum wage or public sector pensions, or alternatively take up a good deal of the political gossip, say, the recent passing of Obamacare. Sometimes, a “radical” new innovation is brought forward, such as the new Robin Hood tax. Surprise, surprise, it receives support from such champions of the proletariat as Warren Buffet and George Soros. With them on our side how can we possibly lose!?v

The point to all this is that the elite never want the productive classes to ask significant questions about their situation: Why are they on welfare in the first place? Why have they been put into a position where they need to rely on it to get by? Why are there no jobs? Why are the jobs that exist low paying, poor quality work? Why are their rights constantly being eroded? How have they become a serf class?

I started off talking about economic inequality. As the state grows in power and the sphere of peaceful cooperation shrinks, economic wealth becomes less an indicator of entrepreneurial achievement and more an indicator of the ability of some to plunder their fellow man through the political means. The Occupy Movement tends to be suspicious of the present existing large concentrations of wealth.vi In our increasingly statist age this seems a reasonable complaint. What we as libertarians should do, is point the Occupy movement, and more generally, the radical left, in the right – er – correct, direction. We should try to explain to them that if they really think wealth inequality is a problem our goal should be to abolish the state and the violent, political means of exploitation that have always reduce men to poverty and misery in the first place.

iiiFor more on this, see the excellent article, “Toward a Theory of State Capitalism: Ultimate Decision-Making and Class Structure” by Walter E. Grinder and John Hagel III, Journal of Libertarian Studies, V1, N1, p59 – 79. PDF here.

ivThis subject has been written on by both libertarian and radical left historians. See, Roy Childs Jr.; Ronald Radosh; Gabriel Kolko, Main Trends in American History, chapter 1 and chapter 4; and Kevin Carson, Studies in Mutualist Political Economy, Chapter 5